NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
1.
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Draper
Oakwood Technology Acquisition, Inc. (the “Company”) is a blank check company incorporated in Delaware on April 27,
2017. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization, recapitalization, exchangeable share transaction or other similar business transaction, one or more
operating businesses or assets (a “Business Combination”). On September 4, 2018, the Company entered into a Business
Combination Agreement with DOTA Holdings Limited, a newly formed Cayman Islands exempted company, Reebonz Limited, a Singapore
corporation (“Reebonz”) and certain other parties (see Note 8).
At
September 30, 2018, the Company had not yet commenced operations. All activity through September 30, 2018 relates to the Company’s
formation and the initial public offering (“Initial Public Offering”), which is described below, identifying a target
company for a Business Combination and activities in connection with the proposed Business Combination, as described in Note
8.
The
registration statement for the Company’s Initial Public Offering was declared effective on September 14, 2017. On September
19, 2017, the Company consummated the Initial Public Offering of 5,000,000 units (“Units” and, with respect to the
Class A common stock included in the Units sold, the “Public Shares”), generating gross proceeds of $50,000,000, which
is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 250,000 units (the “Placement Units”)
at a price of $10.00 per Unit in a private placement to Draper Oakwood Investments, LLC (“Sponsor”) and EarlyBirdCapital,
Inc. (“EarlyBirdCapital”), generating gross proceeds of $2,500,000, which is described in Note 5.
Following
the closing of the Initial Public Offering on September 19, 2017, an amount of $50,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the Placement Units was placed in a trust account (“Trust Account”)
and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of
1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment
company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined
by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account,
as described below, except that interest earned on the Trust Account can be released to the Company to pay its franchise and income
tax obligations.
On
September 27, 2017, in connection with the underwriters’ exercise of their over-allotment option in full, the Company
consummated the sale of an additional 750,000 Units at $10.00 per Unit, and the sale of an additional 22,500 Placement Units,
of which 18,000 Placement Units were purchased by the Sponsor and 4,500 Placement Units were purchased by EarlyBirdCapital
and their designees at $10.00 per Unit, generating gross proceeds of $225,000. Following the closing, an additional
$7,500,000 of net proceeds was placed in the Trust Account, resulting in $57,500,000 held in the Trust Account as of
September 27, 2017.
Transaction
costs amounted to $2,199,396, consisting of $1,725,000 of underwriting fees and $474,396 of Initial Public Offering costs. At
September 30, 2018, $7,685 of cash was held outside of the Trust Account and was available for working capital purposes.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public
Offering and Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together
have a fair market value equal to at least 80% of the balance in the Trust Account (excluding franchise and income taxes payable)
at the time of the signing of an agreement to enter into a Business Combination. However, the Company will only complete a Business
Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the
target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business
Combination.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii)
by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their
shares for a pro rata portion of the amount then on deposit in the Trust Account ($10.10 per share (after giving effect to the
deposit into the Trust Account with respect to the extension described below), plus any pro rata interest earned on the funds
held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). The Company
will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation,
conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and
file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of the
transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons, the
Company will offer to redeem the Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor, officers
and directors (the “Initial Stockholders”) have agreed to (a) vote their Founder Shares (as defined in Note 6), Placement
Shares (as defined in Note 5) and any Public Shares held by them in favor of approving a Business Combination and (b) not to convert
any Founder Shares, Placement Shares and Public Shares in connection with a stockholder vote to approve a Business Combination
or sell any such shares to the Company in a tender offer in connection with a Business Combination. Additionally, each public
stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
The
Company initially had until September 19, 2018 to consummate a Business Combination. However the Board of Directors has the right
to extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total
of up to 18 months from the closing of the Initial Public Offering to complete a Business Combination) (the “Combination
Period”). Pursuant to the terms of the Amended and Restated Certificate of Incorporation and the trust agreement entered
into between the Company and Continental Stock Transfer & Trust Company, in order to extend the time available for the Company
to consummate a Business Combination, the Sponsor or its designees must deposit into the Trust Account $575,000 ($0.10 per share)
for each three month extension (up to an aggregate of $1,150,000, or $0.20 per share, if the deadline is extended for the full
six months) in exchange for a non-interest bearing unsecured promissory note. The Sponsor and its designees are not obligated
to fund the Trust Account to extend the time for the Company to complete a Business Combination.
On
September 19, 2018, the period of time for the Company to consummate a Business Combination was extended for an additional three
month period ending on December 19, 2018, and, accordingly, $575,000 was deposited into the Trust Account. The deposit was funded,
in part, by a non-interest bearing unsecured loan from the Sponsor. The loan is repayable upon the consummation of a Business
Combination (see Note 6).
The
Initial Stockholders have agreed (i) to waive their rights to liquidating distributions from the Trust Account with respect to
their Founder Shares, Placement Shares, Placement Rights (as defined in Note 5) and Placement Warrants (as defined in Note 5)
if the Company fails to consummate a Business Combination within the Combination Period and (ii) not to propose an amendment to
the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s
obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides
the public stockholders with the opportunity to redeem their shares in conjunction with any such amendment. However, the Initial
Stockholders will be entitled to liquidating distributions with respect to any Public Shares acquired if the Company fails to
consummate a Business Combination or liquidates within the Combination Period. In the event of such distribution, it is possible
that the per share value of the assets remaining available for distribution (including Trust Account assets) will be less than
the $10.10 per Unit in the Initial Public Offering (after giving effect to the deposit into the Trust Account with respect to
the extension described below). In order to protect the amounts held in the Trust Account, Mr. Aamer Sarfraz, the Company’s
Chief Executive Officer, has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered
or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third
party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or
to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event
that an executed waiver is deemed to be unenforceable against a third party, Mr. Sarfraz will not be responsible to the extent
of any liability for such third party claims. The Company will seek to reduce the possibility that Mr. Sarfraz will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s
independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
2.
LIQUIDITY AND GOING CONCERN
As
of September 30, 2018, the Company had $7,685 in its operating bank accounts, $58,905,007 in securities held in the Trust Account
to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and a working capital
deficit of $1,011,916. As of September 30, 2018, approximately $1,405,000 of the amount on deposit in the Trust Account represented
interest income, which is available to pay the Company’s tax obligations. During the nine months ended September 30, 2018,
the Company withdrew $55,826 of interest income from the Trust Account in order to pay its franchise taxes.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying
and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
On
July 30, 2018, the Sponsor loaned the Company $200,000, of which $135,000 was used to finance transaction costs in connection
with a Business Combination and $65,000 was used to fund the deposit required in order to extend the period of time with which
the Company has to complete a Business Combination. The Company will need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and
Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem
reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able
to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures
to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of
a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available
to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability
to continue as a going concern. These condensed financial statements do not include any adjustments relating to the recovery of
the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue
as a going concern.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions
to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information
or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted,
pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion
of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring
nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods
presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017 as filed with the SEC on March 29, 2018, which contains the audited financial statements
and notes thereto. The financial information as of December 31, 2017 is derived from the audited financial statements presented
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The interim results for the three and
nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December
31, 2018 or for any future interim periods.
Emerging
growth company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the
“Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and
it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its
periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use
of estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from the Company’s estimates.
Cash
and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less, when purchased, to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2018 and December 31, 2017.
Marketable
securities held in Trust Account
At
September 30, 2018 and December 31, 2017, the assets held in the Trust Account were substantially held in cash and U.S. Treasury
Bills.
Common
stock subject to possible redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption
is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common
stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at
September 30, 2018 and December 31, 2017, common stock subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Income
taxes
The
Company complies with the accounting and reporting requirements of Accounting Standards Codification (“ASC”) Topic
740 “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of
assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties
as of September 30, 2018 and December 31, 2017. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
On
December 22, 2017 the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform,
the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740 requires
companies to recognize the effect of tax law changes in the period of enactment; therefore, the Company was required to revalue
its deferred tax assets and liabilities at the new rate.
The effective income tax rate for the three and nine months ended
September 30, 2018 was 115% and 300%, respectively. The income tax expense for the three and nine months ended September 30, 2018
differs from the amount that would be expected after applying the statutory income tax rate primarily due to the non-deductibility
of transactional costs incurred in connection with the search for potential targets for a Business Combination.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Net
loss per common share
Net
loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.
The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption
at September 30, 2018 and 2017, which are not currently redeemable and are not redeemable at fair value, have been excluded from
the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust
Account earnings. The Company has not considered the effect of (1) warrants sold in the Initial Public Offering and private placement
to purchase 3,011,250 shares of Class A common stock, (2) rights sold in the Initial Public Offering and private placement that
convert into 602,250 shares of Class A common stock and (3) 500,000 shares of Class A common stock, warrants to purchase 250,000
shares of Class A common stock and rights that convert into 50,000 shares of Class A common stock in the unit purchase option
sold to the underwriter, in the calculation of diluted loss per share, since the exercise of the warrants, the conversion of the
rights into shares of common stock and the exercise of the unit purchase option is contingent upon the occurrence of future events.
As a result, diluted loss per common share is the same as basic loss per common share for the periods.
Reconciliation
of net loss per common share
The
Company’s net income (loss) is adjusted for the portion of income that is attributable to common stock subject to redemption,
as these shares only participate in the income of the Trust Account and not the losses of the Company. Accordingly, basic and
diluted loss per common share is calculated as follows:
|
|
Three Months
Ended
September 30,
|
|
|
Nine
Months
Ended
September 30,
|
|
|
For the
Period from
April 27,
2017
(inception)
through September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net income (loss)
|
|
$
|
(90,555
|
)
|
|
$
|
3,843
|
|
|
$
|
(71,334
|
)
|
|
$
|
2,343
|
|
Less: Income attributable to common stock subject to redemption
|
|
|
(200,583
|
)
|
|
|
(13,067
|
)
|
|
|
(587,760
|
)
|
|
|
(13,067
|
)
|
Adjusted net loss
|
|
$
|
(291,138
|
)
|
|
$
|
(9,224
|
)
|
|
$
|
(659,094
|
)
|
|
$
|
(10,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
2,326,779
|
|
|
|
1,353,526
|
|
|
|
2,309,823
|
|
|
|
1,310,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.13
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.01
|
)
|
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Depository Insurance coverage of $250,000. At September 30, 2018 and December 31, 2017,
the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks
on such accounts.
Fair
value of financial instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily
due to their short-term nature.
Recently
accounting pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s financial statements.
4.
INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 5,750,000 Units at a purchase price of $10.00 per Unit, which includes the exercise
by the underwriters of their overallotment option in full of 750,000 Units at $10.00 per Unit. Each Unit consists of one share
of Class A common stock, one right (“Public Right”) and one-half of one warrant (“Public Warrant”). Each
Public Right will convert into one-tenth (1/10) of one share of Class A common stock upon consummation of a Business Combination
(see Note 9). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price
of $11.50 (see Note 9).
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
5.
PRIVATE PLACEMENT
Simultaneously
with the Initial Public Offering, the Sponsor and EarlyBirdCapital purchased an aggregate of 250,000 Placement Units (200,000
Placement Units by the Sponsor and 50,000 Placement Units by EarlyBirdCapital) at a price of $10.00 per Placement Unit, for an
aggregate purchase price of $2,500,000). On September 27, 2017, the Company consummated the sale of an additional 22,500 Placement
Units at a price of $10.00 per Placement Unit, of which 18,000 Placement Units were purchased by the Sponsor and 4,500 Placement
Units were purchased by EarlyBirdCapital (and their designees), generating gross proceeds of $225,000. Each Placement Unit consists
of one share of Class A common stock (“Placement Share”), one right (“Placement Right”) and one-half of
one warrant (each, a “Placement Warrant”). Each Placement Right will convert into one-tenth (1/10) of one share of
Class A common stock upon consummation of a Business Combination (see Note 8). Each whole Placement Warrant is exercisable to
purchase one share of Class A common stock at an exercise price of $11.50. The proceeds from the Placement Units were added to
the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination
within the Combination Period, the proceeds of the sale of the Placement Units will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law), and the Placement Rights and Placement Warrants will expire worthless.
6.
RELATED PARTY TRANSACTIONS
Founder
Shares
On
May 11, 2017, the Company issued an aggregate of 1,437,500 shares of Class F common stock to the Sponsor (“Founder Shares”)
for an aggregate purchase price of $25,000. The Founder Shares will automatically convert into Class A common stock upon the consummation
of a Business Combination on a one-for-one basis, subject to adjustments as described in Note 9. The 1,437,500 Founder Shares
included an aggregate of up to 187,500 shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the Initial Stockholders would own, on an as-converted basis, 20%
of the Company’s issued and outstanding shares after the Initial Public Offering (excluding the Placement Units and the
Representative Shares (as defined in Note 9)). As a result of the underwriters’ election to fully exercise their over-allotment
option on September 27, 2017, 187,500 Founder Shares are no longer subject to forfeiture.
The
Initial Stockholders have agreed that, subject to certain limited exceptions, 50% of the Founder Shares will not be transferred,
assigned or sold until one year after the date of the consummation of a Business Combination or earlier if, subsequent to a Business
Combination, the last sales price of the Company’s Class A common stock equals or exceeds $12.50 per share (as adjusted
for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period
after a Business Combination, and the remaining 50% of its Founder Shares will not be transferred, assigned or sold until one
year after the date of the consummation of a Business Combination. All of the Founder Shares may be released from escrow earlier
than as described above if, within that time period, the Company consummates a subsequent liquidation, merger, stock exchange,
or other similar transaction which results in all of the stockholders having the right to exchange their shares of common stock
for cash, securities or other property.
Advances
from Related Party
In
September 2018, the Company received an aggregate of $10,400 in advances from its Chief Executive Officer in order to fund working
capital requirements. The advances are non-interest bearing, unsecured and due on demand.
Administrative
Services Agreement
The
Company entered into an agreement whereby, commencing on September 14, 2017 through the earlier of the consummation of a Business
Combination or the Company’s liquidation, the Company pays the Sponsor a monthly fee of $10,000 for office space, utilities
and administrative support. For the three and nine months ended September 30, 2018, the Company incurred $30,000 and $90,000,
respectively, in fees for these services. For the three months ended September 30, 2017 and for the period from April 27, 2017
(inception) through September 30, 2017, the Company incurred $10,000 in fees for these services. At September 30, 2018 and December
31, 2017, $15,000 and $5,000 in administrative fees, respectively, are included in accounts payable and accrued expenses in the
accompanying condensed balance sheets.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, the Company’s officers and directors
or their affiliates may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required
(“Working Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital
Loans would either be paid upon consummation of a Business Combination, without interest, or, at the holder’s discretion,
up to $1,500,000 of the Working Capital Loans may be converted into Units at a price of $10.00 per Unit. The Units would be identical
to the Placement Units. On July 30, 2018, the Sponsor loaned the Company $200,000, of which $135,000 was used to finance transaction
costs in connection with a Business Combination and $65,000 was used to fund the deposit required in order to extend the period
of time with which the Company has to complete a Business Combination. The loan is evidenced by a promissory note, is non-interest
bearing, unsecured and due to be paid on the earlier of (i) the consummation of a Business Combination or (ii) the Company’s
liquidation. The loan may also be converted into Units of the post-Business Combination entity at a price of $10.00 per Unit.
In September 2018, the promissory note was amended to provide for aggregate borrowings of up to $135,000 and the previously funded
$65,000 loan was applied to the $575,000 Extension Loan described below.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
In
order to fund the Trust Account to extend the time for the Company to complete a Business Combination, the Sponsor or its designees
may, but are not obligated to, loan the Company funds (“Extension Loan”). Any such payments would be made in the form
of a non-interest bearing unsecured loan payable upon the consummation of a Business Combination. If the Company completes a Business
Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. The
letter agreement with the Initial Stockholders contains a provision pursuant to which the Sponsor has agreed to waive its right
to be repaid for such loans out of the funds held in the Trust Account in the event that the Company does not complete a Business
Combination. On September 19, 2018, the period of time for the Company to consummate a Business Combination was extended for an
additional three month period, ending on December 19, 2018, and, accordingly, $575,000 was deposited into the Trust Account. In
connection with such extension, the Sponsor loaned the Company $575,000 and the Company issued a promissory note to the Sponsor
in the principal amount of up to $575,000 to the Sponsor.
At
September 30, 2018, an aggregate of $710,000 is owed by the Company to the Sponsor pursuant to the above loans.
7.
COMMITMENTS
Registration
Rights
Pursuant
to a registration rights agreement entered into on September 14, 2017, the holders of the Founder Shares, Placement Units (and
their underlying securities), Representative Shares (as a defined below) and any Units that may be issued upon conversion of the
Working Capital Loans (and their underlying securities) are entitled to registration rights. The holders of a majority of these
securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities.
Notwithstanding anything to the contrary, EarlyBirdCapital and its designees may only make a demand registration (i) on one occasion
and (ii) during the five year period beginning on the effective date of the registration statement. The holders of the majority
of the Founders Shares can elect to exercise these registration rights at any time commencing three months prior to the date on
which the shares of common stock are to be released from escrow. The holders of a majority of the Placement Units or Units issued
to the Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made to the Company (in each case,
including the underlying securities) can elect to exercise these registration rights at any time after the Company consummates
a Business Combination. In addition, the holders will have certain “piggy-back” registration rights with respect to
registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register
for resale such securities pursuant to Rule 415 under the Securities Act. Notwithstanding anything to the contrary, EarlyBirdCapital
and its designees may participate in a “piggy-back” registration during the seven year period beginning on the effective
date of the registration statement. However, the registration rights agreement provides that the Company will not permit any registration
statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will
bear the expenses incurred in connection with the filing of any such registration statements.
Advisory
Services
The
Company has engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist the Company in holding
meetings with its stockholders to discuss a potential Business Combination and the target business’ attributes, introduce
the Company to potential investors that are interested in purchasing securities, assist the Company in obtaining stockholder approval
for the Business Combination and assist the Company with its press releases and public filings in connection with a Business Combination.
The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount
equal to $2,300,000 (exclusive of any applicable finders’ fees which might become payable). The Company will have the right
to pay up to 25% of such amount to another FINRA member firm retained by the Company to assist the Company in connection with
a Business Combination.
8.
BUSINESS COMBINATION AGREEMENT
On
September 4, 2018, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”)
with DOTA Holdings Limited, a newly formed Cayman Islands exempted company (“Pubco”), DOTA Merger Subsidiary Inc.,
a newly formed Delaware corporation and a wholly-owned subsidiary of Pubco (“Merger Sub”), Draper Oakwood Investments,
LLC, a Delaware limited liability company, in the capacity as the Purchaser Representative thereunder (the “Purchaser Representative”),
Reebonz, and the shareholders of Reebonz named therein (the “Sellers”).
Pursuant
to the Business Combination Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions
contemplated by the Business Combination Agreement (the “Closing”), (a) Merger Sub will merge with and into the Company,
with the Company continuing as the surviving entity (the “Merger”), and with holders of the Company’s securities
receiving securities of Pubco, and (b) Pubco will (i) acquire all of the issued and outstanding capital shares of Reebonz from
the Sellers in exchange for ordinary shares of Pubco, with Reebonz becoming a wholly-owned subsidiary of Pubco, and (ii) assume
Reebonz’s outstanding options, warrants and other securities convertible into or that have the right to acquire Reebonz
shares.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
The
total consideration to be provided at the Closing by Pubco to the Sellers and the holders of in-the-money Reebonz Convertible
Securities that are assumed by Pubco will be based on an enterprise value of Reebonz (the “Exchange Consideration”
and the Pubco shares issuable to the Sellers, the “Exchange Shares”) of (i) US$252 million, less (ii) the aggregate
amount of any outstanding indebtedness, net of cash and cash equivalents, of Reebonz and its subsidiaries (the “Target Companies”).
However,
ten percent (10%) of the Exchange Shares otherwise issuable to the Sellers at the Closing (the “Holdback Shares”)
will be held back and not issued until twelve (12) months after the Closing to the extent that the Holdback Shares are not used
to satisfy the Sellers’ indemnification obligations under the Business Combination Agreement. For purposes of determining
the number of Exchange Shares, each Pubco share will be valued at a price per share equal to the price at which each share of
the Company’s common stock is redeemed or converted pursuant to the redemption by the Company of its public stockholders
in connection with the Company’s initial Business Combination, as required by its amended and restated certificate of incorporation
(the “Redemption”).
In
addition to the Exchange Consideration, the Sellers (but not holders of Reebonz Convertible Securities) will also have a contingent
earnout right to receive up to an additional 1,000,000 Pubco shares (the “Earnout Shares”) after the Closing based
on the consolidated revenues of Pubco and its subsidiaries, including the Target Companies, and Pubco’s stock price, during
the calendar years 2019 and 2020.
The
obligations of the parties to consummate the Transactions are subject to various conditions, including the following mutual conditions
of the parties unless waived: (i) the approval of the Business Combination Agreement and the transactions contemplated thereby
and related matters by the requisite vote of the Company’s stockholders; (ii) expiration of any waiting period under applicable
antitrust laws; (iii) receipt of requisite regulatory approvals and specified third party consents; (iv) no law or order preventing
or prohibiting the Transactions; (v) no pending litigation to enjoin or restrict the consummation of the Closing; (vi) the Company
having at least $5,000,001 in net tangible assets as of the Closing, after giving effect to the completion of the Redemption;
(vii) the election or appointment of members to Pubco’s board of directors as described above; (viii) the effectiveness
of the Registration Statement; and (ix) the assumption by Pubco of the Reebonz Convertible Securities, as described above.
9.
STOCKHOLDERS’ EQUITY
Preferred
Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share
with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.
At September 30, 2018 and December 31, 2017, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock
— The Company is authorized to issue 15,000,000 shares of Class A common stock with a par value of
$0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. At September 30,
2018 and December 31, 2017, there were 968,696 and 856,443 shares of Class A common stock issued and outstanding, excluding 5,168,804
and 5,281,057 shares of common stock subject to possible redemption, respectively.
Class
F Common Stock
— The Company is authorized to issue 3,000,000 shares of Class F common stock with a par value of
$0.0001 per share. Holders of the Company’s Class F common stock are entitled to one vote for each share. At September 30,
2018 and December 31, 2017, there were 1,437,500 shares of Class F common stock issued and outstanding.
The
shares of Class F common stock will automatically convert into shares of Class A common stock at the time of a Business Combination
on a one-for-one basis, subject to adjustment as follows. In the case that additional shares of Class A common stock, or equity-linked
securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering in connection with the
closing of a Business Combination, the ratio at which shares of Class F common stock shall convert into shares of Class A common
stock will be adjusted (unless the holders of a majority of the outstanding shares of Class F common stock agree to waive such
adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable
upon conversion of all shares of Class F common stock will equal, in the aggregate, on an as-converted basis, 20% of the total
number of all shares of common stock outstanding upon completion of the Initial Public Offering (not including Placement Shares
or the Representative Shares) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in
connection with a Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller
in a Business Combination or pursuant to Units (and their underlying securities) issued to the Sponsor upon conversion of Working
Capital Loans, after taking into account any shares of Class A common stock redeemed in connection with a Business Combination.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Holders
of Class A common stock and Class F common stock will vote together as a single class on all matters submitted to a vote of stockholders
except as required by law.
Rights
— Each holder of a right will receive one-tenth (1/10) of one share of common stock upon consummation of a Business
Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional
shares will be issued upon conversion of the rights. No additional consideration will be required to be paid by a holder of rights
in order to receive its additional shares upon consummation of a Business Combination, as the consideration related thereto has
been included in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive
agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide
for the holders of rights to receive the same per share consideration the holders of the common stock will receive in the transaction
on an as-converted into common stock basis and each holder of a right will be required to affirmatively covert its rights in order
to receive 1/10 share underlying each right (without paying additional consideration). The shares issuable upon conversion of
the rights will be freely tradable (except to the extent held by affiliates of the Company).
If
the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held
in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive
any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights
will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights
upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights.
Accordingly, holders of the rights might not receive the shares of Class A common stock underlying the rights.
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business
Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective
registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants
and a current prospectus relating to them is available. The Company will use its best efforts to file with the SEC a registration
statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the
Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness
of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance
with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of
Class A common stock issuable upon exercise of the Public Warrants is not effective within 90 days following the consummation
of Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period
when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption,
or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants
will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The
Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
at
any time during the exercise period;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption; and
|
|
●
|
if,
and only if, the last sale price of the Company’s Class A common stock equals or exceeds $24.00 per share for any 20
trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the
notice of redemption to the warrant holders.
|
|
●
|
If,
and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying
such warrants.
|
The
Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that
the Placement Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable,
assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally,
the Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers
or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted
transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the
Public Warrants.
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
The
exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain
circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However,
the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no
event will the Company be required to net cash settle the warrants. There will be no redemption rights upon the completion of
a Business Combination with respect to the Company’s warrants. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive
any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held
outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Representative
Shares
At
the closing of the Initial Public Offering, the Company issued EarlyBirdCapital 100,000 shares of Class A common stock (the “Representative
Shares”) for no additional consideration. In addition, on September 27, 2017, in connection with the underwriters’
election to fully exercise their over-allotment option, the Company issued an additional 15,000 Representative Shares to the underwriters
for no additional consideration. The Company accounted for the Representative Shares as an expense of the Initial Public Offering,
resulting in a charge directly to stockholders’ equity. The Company determined the fair value of Representative Shares to
be $1,150,000 based upon the offering price of the Units of $10.00 per Unit. The underwriter has agreed not to transfer, assign
or sell any such shares until the completion of a Business Combination. In addition, the underwriter has agreed (i) to waive its
redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive its
rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business
Combination within the Combination Period.
The
shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days pursuant to Rule
5110(g)(1) of FINRA’s Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any
hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any
person for a period of 180 days immediately following the date of the Initial Public Offering, nor may they be sold, transferred,
assigned, pledged or hypothecated for a period of 180 days immediately following the Initial Public Offering except to any underwriter
and selected dealer participating in the Initial Public Offering and their bona fide officers or partners.
Unit
Purchase Option
On
September 19, 2017, the Company sold to EarlyBirdCapital, for $100, an option to purchase up to 500,000 Units exercisable at $10.00
per Unit (or an aggregate exercise price of $5,000,000) commencing on the later of the first anniversary of the effective date
of the registration statement related to the Initial Public Offering and the consummation of a Business Combination. The unit
purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the
effective date of the registration statement related to the Initial Public Offering. The Units issuable upon exercise of this
option are identical to those offered in the Initial Public Offering. The Company accounted for the unit purchase option, inclusive
of the receipt of $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to stockholders’
equity. The Company estimated the fair value of this unit purchase option to be approximately $1,683,789 (or $3.37 per Unit) using
the Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriters was estimated as
of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.84% and
(3) expected life of five years. The option and such units purchased pursuant to the option, as well as the common stock underlying
such units, the rights included in such units, the common stock that is issuable for the rights included in such units, the warrants
included in such units, and the shares underlying such warrants, have been deemed compensation by FINRA and are therefore subject
to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA’s Conduct Rules. Additionally, the option may not be sold, transferred,
assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date of Initial
Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide
officers or partners. The option grants to holders demand and “piggy back” rights for periods of five and seven years,
respectively, from the effective date of the registration statement with respect to the registration under the Securities Act
of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant
to registering the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise
price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event
of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the option will
not be adjusted for issuances of ordinary shares at a price below its exercise price.
10.
FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
DRAPER OAKWOOD TECHNOLOGY ACQUISITIONS,
INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
|
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
September 30, 2018 and December 31, 2017, and indicates the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value:
Description
|
|
Level
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
58,905,007
|
|
|
$
|
57,667,513
|
|
11.
SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial
statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment
or disclosure in the financial statements.